Activity-based costing system is “a technique of cost attribution to cost units on the basis of benefits received from indirect activities e.g. ordering, setting up, assuring quality” (CIMA, in Rajasekaran and Lalitha, 2011, p.272). In simple terms, in activity-based costing system overheads are assigned to specific activities with individual cost centres and cost activities clearly identified. The current costing system of Manac plc, absorption costing system can be explained as “a costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured” (Accounting Coach, 2013, online). The main differences between the two costing systems relate to the role of overheads in accounting system, the types of cost drivers, and the allocations of costs. Advantages of Activity-Based Costing System for Manac plc There is a set of advantages to be obtained by Manac plc from replacing its current absorption costing system with activity-based costing system. First of all, by introducing activity-based costing system Manac plc management would be able to eliminate a range of activities that do not add value, consequently reducing the cost of product. Introduction of activity-based costing also provides Manac plc financial management the possibility of tracing the costs overheads with an increased level of accuracy and reliability. The value of this advantage can be explained in a way that the management would be able to explore the possibilities of reducing overhead costs to increase the levels of profit margins. Furthermore, by adopting activity-based costing system Manac plc financial management would be able to monitor the total life-cycles of all costs and identify and utilise the possibilities of their reduction. Activity-based costing system can also provide an effective linkage between Manac plc corporate strategy and decision making at an operational level. In other words, Manac plc managers would be able to analyse cost-life cycle…
By John Dudovskiy
Category: Finance
PESTEL stands for political, economical, social, technological, environmental, and legal factors affecting the business. The following table contains major factors within PESTEL analysis: Political Political stability in the UK Changes in US and UK ‘special relationships’ and their impact on multinational business Economical USD:GBR exchange rate Inflation rate in the USA and UK Rate of unemployment in the UK Macroeconomic changes in the UK Social Demographics shifts in the UK Changes in traditional work patterns Increasing level of multiculturalism amongst consumers Shifts in Consumer Values Technological Advent of innovative technology in catering industry Patenting issues associated with technology Environmental Environmental ‘green’ groups and the level of their influence on consumers Global warming, the issues of sustainability Legal Changes in UK rules and regulations in relation to corporate governance Business policies to be introduced by the EU Legal implications of the current tax row
Value network analysis can be applied in relation to Starbucks operations in the UK in order to “explore the structure of its interaction with several actors in a network of relationships” (Zsidisin and Ritchie, 2008, p.40). In simple terms, value network analysis can be specified as more sophisticated version of Porter’s Value Chain analysis in a way that the former framework explains the impact of each network group in a multidirectional manner. For example, as it is illustrated in the following figure, media as an important network group within Starbucks value network has direct implications on the performance of three other individual network groups: suppliers, company operated stores, and licensed stores. This specific interrelationship can not be effectively presented within Porter’s value chain network, due to the fact that this framework is constructed in a rigid and sequential manner. The following table briefly explains the nature of impact each individual network group within Starbucks value network Network group Comments Company operated stores The largest source of revenues from the sale of drink and food products Licensed stores Licensed stores contributed to 9% of total revenues during the financial year of 2011 (Annual Report, 2011). Suppliers This network group comprises suppliers of coffee beans, food products, and various tools and technologies.Suppliers are used by Starbucks for company operated stores, whereas, licensed stores deal with their suppliers in a direct manner. Farmer Support Centres are maintained in Rwanda, Costa Rica and other locations UK Government agencies UK government agencies as an independent network group can impact both, company operated stores, as well as, licensed stores Media Has great impact on the performance of both, company operated and licensed stores. Recently, this impact has been highly negative due to extensive coverage of tax issues from a critical viewpoint.Unlike other network groups, media…
Porter’s Five Forces analysis framework comprises five individual forces that shape the overall level of competition in the industry. These forces are threat of new entrants, threat of substitute products, bargaining power of buyers, bargaining power of suppliers, and the extent of rivalry among existing competitors Threat of new entrants to the industry depends on a range of factors such as the level of capital requirements, the extent of profitability of the industry, possible barriers to enter the industry etc. Threat of substitute products for the company depend on the level of standardisation of products, the level of depreciation, direct and indirect substitution and a range of other factors Bargaining power of buyers as a factor impacting the level of competition within an industry depend on the levels of switching costs for buyers, the extent of customer sensitivity to changes in prices, the nature of the product etc. Bargaining power of suppliers along a wide range of factors depend on the variety of substitute raw materials, the costs associated with changing the supplier, the type of supply-chain management and other factors Extent of rivalry among existing competitors depend on sustainability of competitive edge, the efficiency of advertising, the level of utilisation of critical success factors for the industry etc.
Critical success factors (CSF) can be explained as “an element of the organisational activity which is central to its future success” (Botten, 2009, p.20). The following table presents explanation of Starbucks Critical Success Factors in the UK market: CSF Explanation Quality of products Increasing level of competition in the market is fuelling the level of customer expectations regarding the quality in general, and freshness in particular Customer services Excellent customer services are being adopted as an important source of competitive edge by increasing numbers of coffee shops Shop design Coffee shops in the UK are being positioned as a ‘third place’, where people can spend most of their time apart from workplace and home (Dolan, 2012).Accordingly, relevant atmosphere needs to be developed with the interior, music and design. Social responsibility The impact of corporate social responsibility on profitability has increased significantly in the past several years. Accordingly, the level of engagement in fair trade, recycling policies, carbon emission policies, and employee treatment can be specified as important success factors for branded coffee shops like Starbucks Customer loyalty reward programs In catering industry consumer behaviour is greatly impacted by the level of attractiveness of loyalty programs that offer discounts and other advantages to loyal customers Starbucks Corporation Report uploaded on April 2017 contains the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis and McKinsey 7S Model on Starbucks. Moreover, the report contains analyses of Starbucks’s business strategy, leadership and organizational structure and its marketing strategy. The report also discusses the issues of corporate social responsibility. References Botten, N., 2009. Enterprise Strategy, Elsevier
Recommendations are offered by a range of authors in terms of effective engagement in viral marketing. It has been stressed that “one of the major factors regarding viral adoption is that the consumers must be engaged in the message” (Beneke, 2010, p.195) According to Zarella (2010), utilisation of free products or services within viral marketing programs can enhance the efficiency of a marketing campaign through sparking additional interests from users. Specifically, Zarella (2010) recommends distributing for free inexpensive items such as mugs or t-shirts as an integral part of a viral marketing campaign. The quality of viral marketing content is specified as one of the decisive factors by Mueller (2010). This viewpoint is also shared by Beneke (2010), who argues that the content of a viral marketing campaign has to have an emotional appeal so that the campaign can be highly successful. Additional viewpoint proposed by Scott (2011) relates to exclusivity of viral marketing campaigns. Scott (2011) explains exclusivity in viral marketing as an invitation to join certain clubs, enjoying access to specific products or services prior to their official release dates etc. Addressing the same issue, Kirby (2012) warns that if such offers are introduced in great numbers the level of exclusivity may be compromised, at the same time compromising the effectiveness of the overall campaign. Letelier et al. (2002) propose a range of alternative viral strategies to be implemented by businesses depending on company’s chosen business strategy. Specifically, alternative strategies proposed by Letelier et al. (2002) include fostering allegiance, building excitement, increasing emulation, and creating dissemination. The following table illustrates details associated with each of these strategies: Brand as Authority Promoter as Authority We-Focus Foster Allegiance Strategy Organise: Grassroots,shared meetingsCommunication approach: Solicit authentic voices, publish members’ experience with community Reward for members: Public recognition with…
The main objective of strategic human resources management (SHRM) can be specified as “to ensure that human resource management is fully integrated into strategic planning, that HRM policies cohere both across policy areas and across hierarchies and that HRM policies are accepted and used by line managers as part of their every day work” (Regis, 2009, p.6). Generally, the main approaches to SHRM are divided into three main categories: universalistic, contingency, and configurational. Universalistic or ‘best practice’ approach to HRM relates to the viewpoint that there is a set of best HRM practices and their adoption is going to generate positive results regardless of the circumstances associated with organisations. Universalistic approach states that ‘best practices’ in relation to a wide range of HR issues such as employee recruitment and selection, training and development, employee motivation is equally applicable to each organisation regardless of the nature of unique aspects organisations might have. Contingency or ‘best fit’ approach on the other hand, disagrees with the presence of universal prescriptions to HR issues and stresses the need for integration between HR policies and a wide range of other organisational policies. Configurational approach to SHRM “stresses the need for practices that are contingent with organisational circumstances, but in addition emphasizes the need for horizontal or internal fit” (Sparrow et al., 2004, p.158). To put is simply, configurational approach recognises the validity of ‘best practices’, but at the same time, accepts the importance of adjustment of HR policies with the overall organisational strategy. Alternatively, approaches to SHRM can be divided into four categories: strategy-focused, decision-focused, content-focused, and implementation-focused. References Regis, R. (2009) “Strategic Human Resource Management & Development” Excel Books Sparrow, P.R, Brewster, C. & Harris, H. (2004) “Globalising Human Resource Management” Routledge
By John Dudovskiy
Category: HRM
Starbucks Coffee Company is a global coffee company and a coffeehouse chain headquartered in Washington, the US, and the company operates 18,000 retail stores in 60 countries (Starbucks Company Profile, 2012, online). Starting operations in Seattle in 1971, adherence to its mission statement of ‘to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time’ coupled with an aggressive utilisation of international market expansion strategy have contributed to net revenues of more than USD11.7 billion generated during the financial year of 2011 (Fiscal Annual Report, 2011). Since entering the UK market in 1998, Starbucks currently operates 607 stores in the UK, and there are 128 Starbucks licensed stores in the country (Fiscal Annual Report, 2011). However, the company is faced with significant challenges in the UK market that relate to tax issues, and these challenges are threatening with negative implications on Starbucks growth prospects in the UK. Starbucks operates in a highly competitive industry with the top competitors including Costa, McDonalds, Dunkin Brands Group and others. Moreover, the company faces stiff competition from local cafes as well. Starbucks has licensing agreements with a wide range of companies and “the company’s significant licensing agreements include the North American Coffee Partnership, a joint-venture with the Pepsi-Cola Company in which Starbucks is a 50% equity investor, manufactures and markets ready-to drink beverages, including bottles Frappuccino beverages and Starbucks DoubleShot espresso drinks in the US and Canada” (Company Description, online, 2011). Starbucks Corporation Financial Analysis A brief Starbucks Corporation financial analysis for the year of 2010 will ensure greater depth to the current report. Starbucks faced serious financial difficulties at the end of 2007 and beginning of 2008 partially associated with the global financial crisis. However, the company performance started to improve the following years once Howard…
By John Dudovskiy
Category: Finance
Major points of viral marketing criticism include lack of control over the impact of a viral marketing campaign, vulnerabilities to manipulation and spamming, and limited level of accesability. Lack of Control over the Impact One of the serious disadvantages associated with viral marketing relates to lack of control over the impact of viral marketing campaign. Unlike the majority of alternative marketing campaigns; in some cases it is not possible for businesses to stop a viral marketing campaign. The necessity to stop the marketing campaign may arise when the campaign is proving to be counter-productive, or the level of demand exceeds the company’s production capabilities. Vulnerability to Manipulation and Spamming Disadvantages of viral marketing might include vulnerability to manipulation and spamming. This is especially true in occasions where incentives are provided for the spread of viral message, and in individuals might become motivated to send the message to other individuals that do not wish to receive the message. In this way, there can be a risk for a viral marketing campaign to be a counter-productive. Limited Level of Accessibility Lilien and Grewall (2012) consider limited level of accessibility as a serious disadvantage of viral marketing. Specifically, Lilien and Grewall (2012) point to a wide range of media formats such as Flash Player, Firewall software etc. and argue that internet users need to be equipped with the relevant software in order to be impacted by a viral message. References Lilien, G.L. & Grewal, R. (2012) “Handbook of Business-to-Business Marketing” Edward Elgar Publishing
The definition of social media can be formulated as “websites and applications that enable users to create and share content or to participate in social networking” (Oxford Dictionaries, online, 2012). Social Networking Sites (SNS), on the other hand, can be defined as “sites built around the needs of like-minded individuals, and are built by those individuals” (Wertime and Fenwick, 2012, p.12). Social media is perceived to be the primary platform for distribution of viral marketing messages. Increase in the numbers and types of social media can be interpreted as an indication of increasing significance of viral marketing in scope and depth. The following set of important features of social media can be specified: Firstly, users of social media add value to it by their participation. The numbers of users is considered to be one of the main indicators of popularity, and consequently the success of social media. Accordingly, engaging in viral marketing through the types of social media that has large numbers of participants can be considered as an effective approach to viral marketing. Secondly, social media reflects collective intelligence. According to its type and purpose, the database is regularly enriched by its members by the addition of texts, articles, video, pictures etc. Specific marketing messages are usually integrated with these elements with the intention for these messages to go viral. Thirdly, social media is associated with a high level of accessibility and usability. Increasing levels of accessibility and usability though mobile phones, tablets, and other devices have positive implications on the potentials of viral marketing on the platform of social media. Fourthly, social media is an effective platform for sharing information within a small niche. Each segment within various types of social media is usually built and maintained around the interest of specific group of individuals. This creates…